Can This Bank Stock Top Its 52-Week High?

First Third Bancorp shares zoom ahead on the back of good results for 2012, although there were a few areas that warrant concern.

Shares of Fifth Third Bancorp(NASDAQ:FITB) reached a 52-week high on Thursday. Let's take a look at how it got here to find out if the regional financial player's stock price can notch bigger victories.

How it got hereFifth Third Bancorp has the good fortune not to be a huge, sprawling, goofy megabank these days. That's the kind of financial that's stumbling at present. Look at Bank of America(NYSE:BAC) and Citibank(NYSE:C), both of which just posted 4Q results. Hammered by legal costs related to mortgages, B of A posted a queasy year-over-year decline in its quarterly net profit attributable to shareholders.

Citibank's number wasn't as ugly, but it still didn't impress the market. Its quarterly net grew at a 25% annual clip; that wasn't good enough to hit analyst expectations, and as with B of A, the company's share price sagged after its results were announced.

It's the regional banking groups that are doing well this earnings season. BB&T(NYSE:BBT) and PNC Financial(NYSE:PNC) -- both of which posted quarterly and fiscal year results the same day as Fifth Third -- saw robust and impossible-to-ignore gains in key operational metrics. BB&T posted an annual record in net income available to shareholders, while PNC blasted ahead with a 45% year-over-year rise in the same figure for its 4Q.

Like its regional brethren, Fifth Third also posted some good numbers. Net income available to common shareholders for the most recent quarter came in at $390 million, a nice 28% better than in the same period of 2011. The company did particularly well expanding in its sweet spot of commercial and industrial loans -- far and away its most critical segment in the commercial portfolio, forming almost three-quarters of the total -- cranking them 15% higher on a year-over-year basis. It managed to do fairly well in the competitive mortgage loan space, too, growing that segment's loans total by nearly the same percentage.

And there isn't as much bad stuff as there used to be. The company's net charge-offs (i.e., expenses taken for loans deemed uncollectable) amounted to $147 million in the final three months of 2012, an improvement over the previous quarter and miles better than the $239 million recorded in 4Q 2011. In other words, over the space of a year, it managed to cut NCOs nearly in half.

Narrowing marginAmid the stock-price lifting excitement and hope over numbers like this, there are a few spots of concern here and there. A big one-two is net interest income and margin, both of which aren't as impressive as the above numbers. The former came in at $903 million for Fifth Third's latest quarter, essentially stagnant over the last three periods and nearly $20 million lower than in 4Q 2011. The latter was 3.49%, the lowest during the year and the latest in a series of climb-downs from the year-ago quarter's 3.67%.

Sure, Fifth Third has to sail in the same low-interest waters as everyone else, but some of its rivals are having a smoother ride -- PNC, for one, managed to widen its NIM a bit from the previous quarter, to 3.85% from 3Q's 3.82%. Its net interest income, meanwhile, showed an gain of 11% on a year-over-year basis.

What's nextAll the same, life in the financial sector is generally better for regional banks then for their giant big brothers. The regionals don't have the overhead, their operations are more straightforward and easier for investors to get a bead on, and for the most part, they aren't burdened with a seemingly endless series of lawsuits and government sanctions arising from their crisis-era conduct.

They're also more generous; greatly so, in many cases. Fifth Third currently pays an annualized dividend of $0.40 per share for a yield of 2.6%. The latter figure is matched by BB&T, which at the moment disburses $0.80 at a yearly clip.PNC is ever-so-slightly higher at 2.7% with its annualized $1.60.

By contrast, the fat guys look miserly. Citigroup stuck to its $0.01 quarterly payout, for a barely-there yield of 0.1%. It joined Bank of America in this respect -- the big lender isn't so big with the dividend, doling out a mere $0.04 a share for an anemic rate of 0.3%.

Considering that, Fifth Third occupies the right sector niche at the right time. Investors like the regional banks, and at the moment, they have plenty of reason to be bullish. Fifth Third's operations could still use some improving, but it seems the bank is posting the kind of numbers the market is thirsty for. Going deeper into this year, the test will be whether the company can lift those other figures to a notable degree.

Author

Eric has been writing about stocks and finance since the mid-1990s, when he lived in Prague, Czech Republic. Over the course of a varied career, he has also been a radio newscaster, an investment banker, and a bass player in a selection of rock and roll bands. A native New Yorker, he currently lives in Los Angeles.